What is the ex-dividend date?
The ex-dividend date is the first day on which a stock trades without the right to its next dividend. An investor who owns the shares at the close of trading on the day before the ex-dividend date receives the dividend; one who buys on the ex-dividend date or later does not. It is the single date that decides who gets paid.
The dates of a dividend
A dividend involves several dates:
| Date | What happens |
|---|---|
| Declaration date | The company announces the dividend and its dates |
| Ex-dividend date | The shares start trading without the dividend |
| Record date | The company determines who is entitled to it |
| Payment date | The dividend is paid into investors' accounts |
Because trades take one or two business days to settle, the ex-dividend date is set so that anyone who buys before it is registered in time for the record date. In Germany, the ex-dividend date is usually the business day after the annual general meeting, and the payment follows a few days later.
What happens to the price
On the ex-dividend date the share price typically drops by roughly the amount of the dividend, because that money is leaving the company:
The investor's wealth does not change: what disappears from the share price arrives as cash.
A simple illustration
A stock closes at €50.00 on the day before its ex-dividend date and pays a dividend of €1.50. On the ex-dividend date it opens at about €48.50. For an investor with 100 shares:
Total wealth is unchanged: €150 has moved from the share price into a dividend payment, before any withholding tax.
What it means in practice
- Buying just before the ex-dividend date to "capture" a dividend does not create free money: the price drop offsets the dividend, and tax on the dividend can turn the trade into a loss.
- Price charts show a drop on ex-dividend dates that is not a loss. Total return figures, which reinvest dividends, remove it.
- Distributing ETFs have ex-dividend dates too, on which their price drops by the amount distributed.
- Income planning depends on the payment dates, which is what a dividend calendar shows.
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